The allure of emerging markets versus developed ones is easy to understand: higher economic growth and lower debts. But as we investors poured money into Brazil, Russia, India and China (the Bric economies), a niche segment of the emerging investment universe has been ignored. It’s the frontier markets: places such as Vietnam and areas of the Middle East.
The reason for the lack of interest is simple: underperformance. The table and the chart show the progress of developed, emerging and frontier markets since stock markets bottomed out in 2009. It's clear that core emerging markets have trounced their upstart rivals.
It's a similar story when it comes to fund inflows. According to Dr Slim Feriani, a frontier markets specialist at asset management group Advance Emerging Capital, and manager of the UK's only listed frontiers fund, emerging market funds are outpacing their frontier siblings by a considerable margin. "According to fund analysis company EPFR, inflows so far this year into frontier funds were a reasonable $78m [£50.65m]...but these inflows are small beer compared with the $17.3bn that flowed into emerging market funds in the first half of 2010."
